The price of oil dropped below $95 a barrel on Friday as a strengthening dollar made crude more expensive for traders using other currencies.

By early afternoon in Europe, benchmark crude for June delivery was down $1.74 to $94.65 a barrel in electronic trading on the New York Mercantile Exchange. The contact lost 23 cents to finish at $96.39 a barrel on the Nymex on Thursday.

Since oil is traded in dollars, a stronger dollar makes crude and other commodities less appealing to investors with other currencies.

On Friday, the euro was down to $1.2998 from $1.3041 late Thursday in New York. The dollar also gained on the Japanese yen and was trading at 101.34 yen on Friday, the first time it broke above 100 yen in over four years, since April 2009.

Recent signs of improvement in U.S. employment data have sparked speculation that the Federal Reserve might scale back its aggressive monetary policy.

Traders were also influenced by remarks Thursday by Charles Plosser, president of the Fed's Philadelphia regional bank, said Stan Shamu of IG Markets in Melbourne.

Plosser suggested the Fed should "seriously look at tapering off asset purchases," Shamu said in a commentary, because the U.S. employment picture was improving. That could spark a rally in the dollar. The Fed is currently buying $85 billion of government bonds a month to hold down long-term interest rates and encourage borrowing and spending.

The Labor Department on Thursday reported the number of Americans who applied for unemployment benefits last week fell by 4,000 to a seasonally adjusted 323,000. Layoffs have receded to pre-recession levels.

The Organization of the Petroleum Exporting Countries made a slight upward revision to its forecast for demand for its crude oil this year, to 29.8 million barrels a day. That is 100,000 barrels a day more than its forecast from last month but still 400,000 barrels a day less than demand for OPEC crude in 2012.

OPEC said it expected global oil use to be "much higher" in the second half of the year, but warned that the struggles of the eurozone and possible lower growth in China could hurt demand.

"A fragile recovery in the global economy has been visible since the beginning of the year, but momentum has started slowing again and growth risks are skewed to the downside," OPEC said in its monthly report on the oil market.

Brent crude, which is a benchmark for many international oil varieties, was down $1.73 to $102.74 a barrel on the ICE Futures exchange in London.